Assessing labor risks and supporting improvements to working conditions are crucial for FMO’s SDG 8 goal of inclusive and sustainable economic growth, employment,and decent work for all.
Since the Dutch government funds Access to Energy Fund (AEF) and Building Prospects typically invest in high labor risk sectors (like energy or agriculture) and countries, a study was conducted to explore approaches for enhancing job quality.
It is widely recognized that labor risks and opportunities are highly context specific. Therefore, to help FMO staff identify key contextual risks and inform future developments around decent work and job quality, this study focused on:
ERGON, a labor consultancy firm, undertook this task by developing sector-specific labor risk matrices for 15 countries and supplemented them with 4 case studies to demonstrate the business case for investing in job quality. Two of the customers included are funded by AEF and Building Prospects.
By mapping the risks in individual countries, the study was able to identify the most salient risks in the agriculture, food and energy sectors.
The study revealed gaps in employment regulation in certain countries and highlighted the ongoing challenges in inspecting and enforcing agricultural labor practices in all countries assessed. Most concerning is the issue of child labor, which is deeply rooted in rural sectors, especially when it comes to coffee, tea, bananas and fish processing. Furthermore, low wages and wage inequality between men and women are pervasive and long-standing problems.
Most countries in the study have ratified all ILO core conventions. However, the enforcement of laws protecting workers is challenging due to the highly informal and transitory nature of the work. Many construction workers are migrants, and the sector relies on them and refugees, with different pay rates being applied to native and non-native workers. Operators often cut back on health and safety measures, and in an industry with a high risk of injury, insurance coverage and a lack of decent compensation are key risks.
Although some issues associated with job quality are outside the scope of Performance Standard 21 compliance, they represent important opportunities for FMO to work with customers to create significant impact on SDG 8. The report identified areas where FMO can support its customers and their business partners to promote and enhance job quality across both agribusiness and energy investments.
The case studies identified three clear business benefits to promoting job quality for customers of FMO: (i) value creation (e.g., increased productivity); (ii) business growth and resilience (e.g., improving access to international capital); and (iii) enhanced compliance and risk management outcomes (e.g., enhanced social license to operate). These can be addressed through initiatives such as improved worksite accommodation and safety, improved training, establishing a reputation as a good and fair employer, and introducing internal training schemes to compensate for any local skills shortage.
Understanding risk contexts for each country is critical for enhancing the quality of FMO’s risk management. Certain risks are attached to external factors, such as child labor, which is dependent on the development and governance status of the country involved, whilst in the Energy sector, the short-term nature of projects often means there is no time to remedy labor compliance risks.
Identifying skills gaps and working to address them offers real potential for FMO customers to add value to the job quality agenda. In addition, FMO and customers’ initiatives to promote gender equality need to understand the local context and adopt appropriate measures that for example, may require a gradual approach. Finally, the study highlights that successful interventions for improving job quality are those that connect enhanced working conditions with tangible operational and business outcomes.